A $15 Minimum Wage Is Not the Best Way to Help Poor Workers

[think]

A $15 Minimum Wage Is Not the Best Way to Help Poor Workers

By Harry J. Holzer - Dec 21 2016 9:49 AM ET

Holzer is the John LaFarge Jr. SJ Professor of Public Policy at Georgetown University and served as Chief Economist for the U.S. Department of Labor in the Clinton Administration.

Without a federal increase, it will hurt the few people it helps—but there is another way

Around the country, the Fight for $15 campaign continues to advocate for minimum wages of $15. Several states and large cities, including Seattle, San Francisco, Los Angeles, New York and Washington, D.C., have passed such minimum wage ordinances, which will phase in over several years. The worthy goal is to help low-income workers earn a better living.

But there a few problems with this logic. For one, most minimum wage earners are not poor adults. They are, instead, young people (ages 16 to 24) or second earners in families where a spouse has a higher-wage job. So minimum wage increases help some poor heads of households, but is not well-targeted on them.

More importantly, by making unskilled workers so expensive for employers to hire, minimum wage increases can reduce employment among the very groups we are trying to help. When the minimum wage increases are moderate in size—up to, say, $10 an hour—such employment losses are very small, so the likely tradeoff between higher wage levels and lower employment becomes worthwhile...

Read more:
http://time.com/4608394/15-dollar-minimum-wage-eitc/

[shraby]

1. That argument has been regurgatated since forever. Usually the ones making it

are the ones living very comfortably and have no idea what those extra dollars mean in the pockets of the workers who want to earn a wage that will pay the bills AND buy food AND buy something they want now and then and not have to pick and choose what is more important for them to buy and what they can do without this time every time they enter a store.

It doesn't even matter which store they have to make those kinds of decision, grocery, clothes, thrift, shoe, general. They have to make them EVERY time.

[HassleCat]

3. Yes, and experience refutes the old, tired argument.

Interesting that someone from the Clinton administration dredged this up right now.

[MADem]

2. If Trump and the GOP get their way, it'll slide back down closer to five

bucks an hour.

Fight for 15 is going to have a hard row to hoe in the next few years.

[Sherman A1]

4. Horse hockey

If the current minimum wage is such a good thing, perhaps the gentleman would like to try living on it.

[gratuitous]

5. Don't raise wages, make businesses more profitable!

Sooner or later, the profits from a business model that works only because employers are paying their employees less-than-subsistence wages will be so great, employers will just naturally raise wages! Trickle down supply side for everyone!

This argument is so tired, it's a wonder it can even get out of bed in the morning, let alone get some prime media real estate in Time magazine.

[smirkymonkey]

23. Seriously, I am so SICk of hearing this crap.

Especially from Democrats.

[edhopper]

6. His stats are wrong

And he is wrong in general.

Minimum-wage workers are older than they used to be. Their average age is 35, and 88 percent are at least 20 years old. Half are older than 30, and about a third are at least 40.

https://www.nytimes.com/2014/06/10/upshot/minimum-wage.html?_r=0

[msongs]

7. let em work for free. call it internship or some other BS title. and no health care ok? nt

[procon]

8. I don't get their argument that a minimum wage increase is only supposed to

help poor heads of households, but not young people or second wage earners. Money is money, right? I have always understood that after training, wages were supposed to provide enough income that workers had a little more to spend beyond just the basics of food, shelter and clothing. This reduced poverty levels and the taxpayer's money went to larger community works rather than subsidising corporate welfare schemes. That system is what greased the whole economic engine for decades.

All those eighteen year old kids are still spending their paychecks just like a head of household worker. Even if they might live at home and don't have to pay room and board, or they aren't paying utility bills, they're still spending money like crazy. They're buying expensive shoes and clothes, jewelry, and all kinds entertainment stuff, and keeping lots of other workers employed in the process. If they purchase big ticket items like computers, gaming rigs, TVs and sound systems, cars and skiing trips instead of groceries and childcare, the money is still in circulation and supporting the economy.

The point is, no one has a right to complain or try to restrict how any worker spends the money they earned. That sets up a class system where employers favor one group of workers are more worthy and eligible for higher wages simply because of their married state or ability to reproduce.

[sarah FAILIN]

11. they're saying employers would hire less

Jobs such as order takers are easily replaced with robotics so less are hired.

[procon]

17. Automation and tech advances will happen regardless of a minimum wage.

But the initial outlay is expensive and any changes will be slow, and take even longer (if at all) before it affects privately owned businesses that lack corporate wealth to bankroll a human-free workforce. Employers use the hiring ruse as a poor excuse to increase their profit margin by trying to reduce their labor costs. The statistics do not support their scare tactics.

If a burger joint serves x-sandwiches a day, they will still require the same number of employees to do the work, regardless of their wages. Trying to cut costs by hiring fewer workers to perform the same workload will negatively affect customer service and result in fewer customers.

[sarah FAILIN]

25. I went to Olive Garden a couple of weeks back

They now have interactive pads to order from or call for more drinks. That is taking a person's job. Yes, a human still brought our food but they could cover more tables. Every time I go to Walmart I go through the self check aisles because they are usually full on the real people checker lines since they cut back. I think we have 24 or so self check lines so that's more jobs gone since they only have 1 watcher.
The mom and pop places may never go this route, but it is here for many businesses. Automation is not that far away.

[FBaggins]

29. Nope... Not regardless of minimum wage

The automation has a price tag just like an employee does. All else being equal, businesses will go with the option that is cheapest. It's also simply incorrect to claim that a burger joint will need the same number of employees to do the work regardless of the wages. Lots of things can theoretically be automated that are not currently done that way

[procon]

37. But you understand that it is not just the hourly wage costs, right?

The skillsets needed for 21st century workers might not look too rosy for human burger flippers, but for trained technicians who install, repair and do the maintenance and upgrades on all those automated systems, work is going to be plentiful.

[FBaggins]

45. I do... but I'm not sure how that helps your argument

When the all-in price for automation (capital expenditure, ongoing maintenance, financing, etc.) is lower than the all-in price for labor (salary, benefits, training, etc.)... then automation will replace labor. Of course, automation continues to get cheaper as time goes by, so raising the price of labor can accelerate the shift.

Sure, jobs selling/supporting/maintaining automation are likely to pay more than burger-flipping jobs... but there would be far fewer of them. Which, of course, is the perennial issue setting minimum wages well above market wages... the people who have the minimum wage jobs are better off... but there are fewer of them.

This isn't a right-wing or left-wing notion... it's simple economic reality. The minimum wage is always zero.

[Goblinmonger]

22. Yeah, they're not going to do that anyway.

If you believe that, I have some land to sell you.

[Willie Pep]

12. For many families even teenage wage earners put into the family "pot" so to speak.

I knew people like that growing up. As soon as they could work they went and got jobs and were expected to help pay for essential stuff at home. The money they earned wasn't just for fun stuff like going to the movies or to buy the latest video games. People who grew up in more affluent households tend to see minimum wage jobs as basically "beer money" jobs but that is not the reality for most people who work these jobs.

88 Percent of Workers Who Would Benefit From a Higher Minimum Wage Are Older Than 20, One Third Are Over 40

See: http://www.epi.org/publication/wage-workers-older-88-percent-workers-benefit/

Also, as you point out, ultimately it doesn't matter much what the money is being spent on from a demand perspective. Putting more money in the hands of working people is good for the economy.

[Bettie]

9. Single Payer health care coupled with a 15 dollar min wage

would be even more helpful.


Also, increasing min. wage is directly stimulative to the economy at large.

[hunter]

10. Barf. Any business that can't pay a living wage deserves to die.

I also think it should be impossible to make more than ten or twenty times the minimum wage.

The uber wealthy class ought to be taxed out of existence. They ought to be sending their kids to the same public schools their lowest paid employees kids attend.

[putitinD]

18. +1

[DefenseLawyer]

13. Raising the minimum wage has never caused unemployment.

Ever. This argument is similar to the "Lowering taxes actually raises revenue" canard from the Reagan era that you can still hear spouted on Fox News. Despite the fact that it "makes sense" as an argument, it's just not true and it's never been true.

[Buckeye_Democrat]

14. Minimum Wage Mythbusters.

https://www.dol.gov/featured/minimum-wage/mythbuster

Minimum Wage Mythbusters

Myth: Raising the minimum wage will only benefit teens.

Not true: The typical minimum wage worker is not a high school student earning weekend pocket money. In fact, 89 percent of those who would benefit from a federal minimum wage increase to $12 per hour are age 20 or older, and 56 percent are women.

Myth: Increasing the minimum wage will cause people to lose their jobs.

Not true: In a letter to President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, "In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front."

Myth: Small business owners can't afford to pay their workers more, and therefore don't support an increase in the minimum wage.

Not true: A July 2015 survey found that 3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12. The survey reports that small business owners say an increase "would immediately put more money in the pocket of low-wage workers who will then spend the money on things like housing, food, and gas. This boost in demand for goods and services will help stimulate the economy and help create opportunities."

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants.

Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour — before tips. Even with a 2014 increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace all but only a handful of states in 2015.

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.

Not true: As of May 2015, employers in San Francisco must pay tipped workers the full minimum wage of $12.25 per hour — before tips. Yet, the San Francisco leisure and hospitality industry, which includes full-service restaurants, has experienced positive job growth this year, including following the most recent minimum wage increase.

Myth: Raising the federal minimum wage won't benefit workers in states where the hourly minimum rate is already higher than the federal minimum.

Not true: While 29 states and the District of Columbia currently have a minimum wage higher than the federal minimum, increasing the federal minimum wage will boost the earnings for nearly 38 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families' pockets, which will be spent on goods and services, stimulating economic growth locally and nationally.

Myth: Younger workers don't have to be paid the minimum wage.

Not true: While there are some exceptions, employers are generally required to pay at least the federal minimum wage. Exceptions allowed include a minimum wage of $4.25 per hour for young workers under the age of 20, but only during their first 90 consecutive calendar days of employment with an employer, and as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive the current federal minimum wage or the state minimum wage, whichever is higher. There are programs requiring federal certification that allow for payment of less than the full federal minimum wage, but those programs are not limited to the employment of young workers.

Myth: Restaurant servers don't need to be paid the minimum wage since they receive tips.

Not true: An employer can pay a tipped employee as little as $2.13 per hour in direct wages, but only if that amount plus tips equal at least the federal minimum wage and the worker retains all tips and customarily and regularly receives more than $30 a month in tips. Often, an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage. When that occurs, the employer must make up the difference. Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, he or she is entitled to the provisions of each law which provides the greater benefits.

Myth: Increasing the minimum wage is bad for businesses.

Not true: Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Myth: Increasing the minimum wage is bad for the economy.

Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised.

Myth: The federal minimum wage goes up automatically as prices increase.

Not true: While some states have enacted rules in recent years triggering automatic increases in their minimum wages to help them keep up with inflation, the federal minimum wage does not operate in the same manner. An increase in the federal minimum wage requires approval by Congress and the president. However, in his call to gradually increase the current federal minimum, President Obama has also called for it to adjust automatically with inflation. Eliminating the requirement of formal congressional action would likely reduce the amount of time between increases, and better help low-income families keep up with rising prices.

Myth: The federal minimum wage is higher today than it was when President Reagan took office.

Not true: While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s. That's why President Obama is urging Congress to increase the federal minimum wage and give low-wage workers a much-needed boost.

Myth: Increasing the minimum wage lacks public support.

Not true: Raising the federal minimum wage is an issue with broad popular support. Polls conducted since February 2013 when President Obama first called on Congress to increase the minimum wage have consistently shown that an overwhelming majority of Americans support an increase.

Myth: Increasing the minimum wage will result in job losses for newly hired and unskilled workers in what some call a “last-one-hired-equals-first-one-fired” scenario.

Not true: Minimum wage increases have little to no negative effect on employment as shown in independent studies from economists across the country. Academic research also has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Myth: The minimum wage stays the same if Congress doesn't change it.

Not true: Congress sets the minimum wage, but it doesn't keep pace with inflation. Because the cost of living is always rising, the value of a new minimum wage begins to fall from the moment it is set.

[think]

15. Thank you for posting. An excellent source and great information. /nt

[Buckeye_Democrat]

16. You're welcome.

I saw a chart somewhere recently that indicated the federal minimum wage, in inflation-adjusted dollars, would need to be over $18/hour to match the buying power of the minimum wage of the late 60's.

[think]

20. You got me curious. Perhaps it's this chart found here?:

http://www.epi.org/publication/given-the-economys-growth-the-federal-minimum-wage-could-be-significantly-higher/

[Buckeye_Democrat]

21. Oops! I remembered the details wrong, but I found the source.

It was chart #6 here:
http://billmoyers.com/2015/01/05/top-10-charts-2014/

I mistakenly looked at the minimum wage adjusted for productivity, not (real) inflation-adjusted.

[taught_me_patience]

26. Not true. The highest, inflation adjusted, minimum wage was about $10 in the 60's n/t

[Buckeye_Democrat]

30. See my corrected "Oops" reply above. n/t

[smirkymonkey]

24. +1000

[Starry Messenger]

19. Whenever I see one of these think pieces start off

with the lie that most low-wage workers are teens, I just stop reading. I know everything after that is trash too.

https://www.google.com/amp/s/thinkprogress.org/amp/p/e6cfef4f13ba?client=safari

[xor]

27. And even if you take what they say as fact

The guy said 16-24 year olds.... People who are 18 - 24 are adults who often have kids, and at the very least need to support themselves. The people saying this are the ones who also say the government should not subsidize loans or help students pay for college, and that if people want a better job then they should go to school. So they are pretty much saying they want people to do all that on their own, but they freak out at the discussion of higher wages for low-wage earners. And if you remove the minimum wage aspect out of the conversation, and just discuss higher wages for these workers in general, they will still oppose it on some twisted idea that certain jobs don't deserve to ever have pay increases for any reason.

While the focus tends to be on minimum wage because I think it's easiest for them say "government shouldn't regulate the free market blah blah blah", but really it comes down to the idea that certain people are lesser than them and that they need to be kept down. I'm not even sure most of them even realize that's what they are saying or why they "feel" that way. Remember that CEO in Seattle said he is going to at minimum pay all his employees $70k/yr, and people on the right went crazy against him? Basically attacked the guy for deciding it was a good business move on his part to pay his employees more. I think that supports what I'm saying about these people.

[taught_me_patience]

28. When I owned a business, the increase in minimum from 8 to 10

greatly negatively impacted the business. The threat to go to $15 forced me to sell the biz... there is no way I was going to deal with that.

[gratuitous]

32. Well, if your business could only be viable by paying sub-standard wages

The community is probably better off without that business. Thanks for the cool story, and closing your doors.

[gratuitous]

36. Judgmental?

Why couldn't you pay your workers a living wage? Especially if all of them went on to bigger and better jobs, it sounds like you were running your business and making a living by keeping them in penury. That sounds pretty assholish to me; your mileage may vary.

[Johnathan146]

46. And his 8 workers who are unemployed are probably much better off also. . ..

[gratuitous]

47. The follow-up post has been taken down

But apparently, each and every employee went on to "bigger and better" jobs somewhere else. Not to mention that according to the non-deleted post, it wasn't because a $15/hour minimum wage had been enacted, but was merely being contemplated, that the doors were closed.

I'll stand by my point, that if a business can't survive without paying its employees a living wage, it shouldn't be in business.

[Javaman]

31. not this retreaded crap again. nt

[Doremus]

33. I hate to read repuke propaganda on DU.

OP - the garbage in this article has been disproven time and time again.

It has no place on this board, imo.

Edit, to give you a little perspective: I'm a small time shopkeeper. My hired helper earns $15/hr. When the fast food places in town are churning through their $8/hr employees, mine stays. That's reason enough to pay decent wages. The other reason? Be the change you want to see.

[TheFrenchRazor]

42. thank you, and you are absolutely right about the importance of turnover. nt

[Squinch]

34. So much proven bullshit is in that article. Why would you post this republican tripe?

[think]

44. I've post many pro minimum wage articles but never seem to find any from Time, WaPo, The NYT, etc

Almost every single story from them plays out very similar to this one. This was posted to remind people what the M$M is trying to sell in regards to the minimum wage.

As for this being Republican tripe; did you see who the author was?

[Warpy]

38. I call right wing BULLSHIT

"But there a few problems with this logic. For one, most minimum wage earners are not poor adults. They are, instead, young people (ages 16 to 24) or second earners in families where a spouse has a higher-wage job. So minimum wage increases help some poor heads of households, but is not well-targeted on them."

This BULLSHIT has been trotted out by cheap labor conservatives at least ten times a year. They keep throwing it at the wall to see if it will stick to halfwits who just read Ayn Rand for the first time.

Here's the bad news from the BLS. https://www.bls.gov/opub/reports/minimum-wage/archive/characteristics-of-minimum-wage-workers-2014.pdf Scroll down a few pages for the table to get to the tl;dr.

You will then notice that the younger workers are a minority. Nearly four times as many minimum wage workers are over 25 years old. In fact, other sources have estimated the median age of a minimum wage worker to be 37. Most are white. Most have children to support.

A $15/hour would definitely help all workers, as increases in the minimum wage are also felt by those earning above it. It will help businesses by increasing demand for goods and services. It will help the government by providing tax revenue where previously there was little to none.

So peddle that right wing BULLSHIT somewhere else. People here at DU recognize it for what it is, justification to keep paying people who work their asses off less than it takes to house and feed them and this is the height of immorality and proof that corporations can never be expected to pay workers what they're worth.

[IronLionZion]

39. Not sure Harry Holzer deserves what he's getting paid

to share this conservative argument. This is basically what Republican politicians and supply side economists claim.

The liberal and demand-side argument is that it puts more money into the hands of people who will spend it and boost their local economies. We already see this play out in booming liberal cities like Seattle. Trickle up

[Wounded Bear]

40. IIRC Seattle is around 3.7% unemployment...

[TheFrenchRazor]

41. um, fuck him, and he's wrong. nt

[Iggo]

43. 77% of people aged 16-24 are adults.

And I'd guess that nearly 100% of "second earners in families where a spouse has a higher-wage job" are also adults.

So maybe when they say they're "not poor adults", they just mean they're not poor.

Right?

[Generator]

48. Money makes people poorer

Who knew?